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Saturday, July 30, 2011

Andy Ong ’s current views on Property Investment

Hi guys, I am writing again to you from the skies over China. I am on a 3 city tour this time around. This is a backlogged trip from 6 months ago. My China country manager has been trying to get me to visit our representative offices that were set up a year ago! I have been postponing this like forever. I am reading this article in China Daily basically saying that rich Chinese investors are looking to the ASEAN area to buy homes.

Quite a few of you are again confused with all the noise and happenings around the world. The US political squabble, European debt issues and Singapore economic slowdown have got quite a few of you worried. Add to the fact that some analysts are predicting huge over supply of residential housing in 2013, this analysis definitely would have caused you some sleep. These factors could have caused me sleepless nights as well, as our exposure is quite huge, (think hundreds of millions).

Macro-economically, Singapore’s economy is still intact. Hey, if we continue to grow at the kind of breakneck pace, something will snap. The Western countries sagging economies are a source of worry as they are key consumers of Asia’s exports. However, think very big picture. International hot money needs a home and for the time being, Asia is it(especially Singapore). Why? With the Euro and US dollars falling quicker than anyone can cover their positions, investors are trying to park their money in stronger Asian currencies.

There is actually not that many choices as the Hong Kong Dollar is pegged to the USD and of the rest of the Asian currencies, the Singapore Dollar is an obvious choice. What does this mean? Low interest rates! Why? Because if interest rates were to go up, all the hot money will not just flow in but tsunami in! Asset inflation will surely occur!

Over-supply concerns? Then don’t acquire the assets which are deemed to be in over-supply. This is primarily in the mass market properties. There are other asset classes which will catch the eye of international investors as they do not attract the 16% seller’s stamp duty. The property investment scenario still have pockets of opportunities but you must know what you are dong or you will be in very, very deep shit. Don’t say I never warn you in advance!